One of the Fed's most important tasks in coming months will be deciding when to remove the oceans of liquidity that it has been pushing into the economy to fight off a deeper recession. Remove it too late once the recovery begins, and the Fed will risk creating new asset bubbles or a run on the dollar. Yet as chief economist for many years at Goldman Sachs, Mr. Dudley consistently supported a weak dollar in the name of reducing the U.S. trade deficit.

This is a dangerous message to send at any time, but in particular as the new Administration embarks on an epic spending spree that will require from $2 trillion to $3 trillion in new U.S. borrowing over the next two years. The world's creditors aren't likely to lend as much, or as cheaply, if they think their dollar assets will be debased as a matter of U.S. policy.

"This time around the administration probably means it when it says it backs a strong dollar. They have to be dead serious about it," said Samarjit Shankar, a director for global strategy at the Bank of New York Mellon, in Boston.

"Trillions worth of U.S. debt is coming soon to the markets. Which foreign central bank or institution will buy this debt if they are not fully convinced the dollar will remain strong?" he added.

The challenge for Obama's team, analysts said, will be to support the dollar's value without direct manipulation in the markets, with the economy in recession, interest rates near zero, and a ballooning current account deficit.

Moreover, Washington will have to achieve all that without antagonizing China, the biggest holder of U.S. Treasury debt, the analysts said.

"It will be a real test. One thing is to finance a $450 billion deficit and another is to finance $2 trillion," said Chris Rupkey, a senior financial economist at Bank of Tokyo-Mitsubishi in New York.

Barack Obama has spoken often of sacrifice. And as recently as a week ago, he said that to stave off the deepening recession Americans should be prepared to face "trillion dollar deficits for years to come."

But apart from a stirring call for volunteerism in his inaugural address, the only specific sacrifices the president has outlined thus far include lower taxes, millions of federally funded jobs, expanded corporate bailouts, and direct stimulus checks to consumers. Could this be described as sacrificial?

What he might have said was that the nations funding the majority of America's public debt -- most notably the Chinese, Japanese and the Saudis -- need to be prepared to sacrifice. They have to fund America's annual trillion-dollar deficits for the foreseeable future. These creditor nations, who already own trillions of dollars of U.S. government debt, are the only entities capable of underwriting the spending that Mr. Obama envisions and that U.S. citizens demand.

These nations, in other words, must never use the money to buy other assets or fund domestic spending initiatives for their own people. When the old Treasury bills mature, they can do nothing with the money except buy new ones. To do otherwise would implode the market for U.S. Treasurys (sending U.S. interest rates much higher) and start a run on the dollar. (If foreign central banks become net sellers of Treasurys, the demand for dollars needed to buy them would plummet.)

In sum, our creditors must give up all hope of accessing the principal, and may be compensated only by the paltry 2%-3% yield our bonds currently deliver.

As absurd as this may appear on the surface, it seems inconceivable to President Obama, or any respected economist for that matter, that our creditors may decline to sign on. Their confidence is derived from the fact that the arrangement has gone on for some time, and that our creditors would be unwilling to face the economic turbulence that would result from an interruption of the status quo.

But just because the game has lasted thus far does not mean that they will continue playing it indefinitely. Thanks to projected huge deficits, the U.S. government is severely raising the stakes. At the same time, the global economic contraction will make larger Treasury purchases by foreign central banks both economically and politically more difficult.

Americans are asking, why do they hate us? They hate what we see right here in this chamber -- a democratically elected government. Their leaders are self-appointed. They hate our freedoms our freedom of religion, our freedom of speech, our freedom to vote and assemble and disagree with each other.

But from Jakarta to Cairo, Muslims and Arabs say that on reflection, they are not surprised by it. And they do not share Mr. Bush's view that the perpetrators did what they did because "they hate our freedoms."

Rather, they say, a mood of resentment toward America and its behavior around the world has become so commonplace in their countries that it was bound to breed hostility, and even hatred.

And the buttons that Mr. bin Laden pushes in his statements and interviews - the injustice done to the Palestinians, the cruelty of continued sanctions against Iraq, the presence of US troops in Saudi Arabia, the repressive and corrupt nature of US-backed Gulf governments - win a good deal of popular sympathy.

Specifically in regard to Israel:

From one end of the region to the other, the perception is that Israel can get away with murder - literally - and that Washington will turn a blind eye. Clearly, the US and Israel have compelling reasons for their actions. But little that US diplomats have done in recent years to broker a peace deal between Israel and the Palestinians has persuaded Arabs that the US is a fair-minded and equitable judge of Middle Eastern affairs.

Over the past year, Arab TV stations have broadcast countless pictures of Israeli soldiers shooting at Palestinian youths, Israeli tanks plowing into Palestinian homes, Israeli helicopters rocketing Palestinian streets. And they know that the US sends more than $3 billion a year in military and economic aid to Israel.

"You see this every day, and what do you feel?" asks Rafiq Hariri, the portly prime minister of Lebanon, who is not an excitable man. "It hurts me a lot. But for hundreds of thousands of Arabs and Muslims, it drives them crazy. They feel humiliated."

It appears that we have not learned our lesson. Fast-forward to 2009, we see new threats from Al-Qaeda based on our unquestioning support for Israel:

A prominent Al-Qaeda figure, Abu Yahya al-Libi, on Thursday urged Islamist militants to launch attacks in the West, naming the United States and Britain, to avenge Israel's onslaught on Gaza.

"Sacrifice what you can to deliver to the capitals of the infidel West, the criminal America, and the agent tyrants a taste of what they deliver to our brothers and our oppressed brothers and people in Palestine," Libi said in a videotape posted on the Internet, according a translation by SITE monitoring group.

Our hypocritical and unwavering support for Israel is endangering us again. Where do you think Israel got all those advanced munitions, used in an illegal manner? Why from your tax dollars, of course!

The U.S. weapons systems used by the Israelis -- including F-16 fighter planes, Apache helicopters, tactical missiles and a wide array of munitions -- have been provided by Washington mostly as outright military grants.

The administration of President George W. Bush alone has provided over 21 billion dollars in U.S. security assistance over the last eight years, including 19 billion dollars in direct military aid as freebies.

"Israel's intervention in the Gaza Strip has been fueled largely by U.S. supplied weapons paid for with U.S. tax dollars," says a background briefing released Thursday by the Arms and Security Initiative of the New York-based New America Foundation.

"The Bush administration has been unwilling to use its considerable influence -- as Israel's major military and political backer -- to dissuade the government in Tel Aviv from its pattern of claiming self-defence while perpetrating collective punishment, human rights violations and undertaking massively disproportionate attacks that harm and kill civilians," Frida Berrigan, senior programme associate at the New America Foundation, told IPS.

Unlike the pound, the dollar is being buttressed by its unique status as the world's reserve currency and the vehicle for transactions in U.S. financial markets, including Treasury bonds. That means investors often seek out the dollar as fears rise, sometimes in spite of their concerns about the U.S. economy.

The U.S. and the U.K. face very similar predicaments, from a deepening recession to a damaged financial system. Both are orchestrating massive bank bailouts and attempting to assist struggling homeowners. Both are ramping up government spending even as they rely on financing from overseas investors. And both countries have central banks that have slashed interest rates and opened the door to unconventional ways of stimulating the economy.

While the dollar continues to benefit from its unique position in financial markets for now, it is far from clear that the resilience will last. "Right now the market is beating up on the pound, but at some point it will look for something else to pick on," says Paul Mackel, a currency strategist at HSBC in London.

The fact that the Federal Reserve stands ready to use a host of unconventional measures to flood the economy with liquidity in an effort to stimulate growth "could hurt the dollar quite badly" later this year, he says.

Scientists Find a Missing Link | Popular Science: "Paleontologists have excavated a plethora of feathered dinosaurs in China over the past few years, but none of those dinosaurs had feathers like this. Scientists examining a news specimen of the dinosaur Beipiaosaurus have found imprints of a proto-feather that looks like the missing link between primitive downy feathers and the modern feathers seen on birds."

Obama vows new 'era of openness', freezes pay of top staff: "President Barack Obama Wednesday vowed to forge a new era of government openness and froze the pay of top staff earning more than 100,000 dollars to show Americans their leaders could also tighten their belts amid economic crisis."